Bruno Prior's blog

One of the things that America does better than us Europeans is its inclination to give (at least in business) another chance to those who at first don't succeed. Whilst bankruptcy is seen in Europe as evidence that someone is not to be trusted with money, in America it is far less of an obstacle to raising money for another venture.

But not all failures are noble. A good test of whether someone who has failed deserves another shot is their attitude to the failure. An acknowledgement of mistakes made, and an understanding of the lessons learned and how to avoid repeating them, should be viewed as a mark of strength. Conversely, blaming others for the previous failure should be viewed as a warning of intellectual and moral weakness and the likelihood of repeat offending.

This came to mind when reading an interview in the Financial Times with Professor Robert Merton, Nobel-prize-winning economist at Harvard University. Prof. Merton was a partner in the Long Term Capital Management (LTCM) hedge fund, which imploded in 1998. I am sure that Prof. Merton is a clever and honourable man, but his explanation for that failure, as reported in the FT, suggests that one should be very wary of utilising the services of the consultancies (IFL and Trinsum) in which he is now engaged (notice that he is no longer risking people's money directly, but charging to advise other people how to risk their money). Many see the collapse of LTCM as symbolising "the perils of excessive speculation", but:

"The causes of the hedge fund's collapse, though, are widely misunderstood, says Robert Merton. While some observers blamed events on the faith that the fund placed in financial models - founded on a belief in rational markets - Prof Merton says the real problem was the way that LTCM's counterparties behaved. When the fund started to suffer losses, the counterparties did not behave as proponents of finance science - or rational markets - predicted. Instead, they sold assets in a seemingly indiscriminate panic, triggering market swings more violent than anything Prof Merton expected."

This displays not only a staggering ignorance of economic history - has the bursting of a bubble ever been accompanied by anything other than "indiscriminate panic"? - but an equally staggering level of hubris. It is not the models that were at fault for failing to reflect actual behaviour, it was the people who were at fault for failing to behave as the models said they should have done. This is a man who sets altogether too much faith in models. That is a warning not to set too much faith in him.

As any psychologist can tell you, denial can manifest itself outwardly in destructive ways. I recently attended a workshop where a member of the British Government's Renewables Advisory Board (RAB) introduced himself as a serial founder of renewable-energy businesses. His explanation for why he had had to start again after his previous adventure in biomass-fired power-generation: the Government had failed to take account of the fact that his technology was more expensive than some, when it had created a competitive market in renewable electricity. Well, isn't that always the problem when businesses struggle - that the Government has failed to compensate for their lack of competitiveness?

The Willetts speech on education is causing waves in Tory circles, as they vie with each other for who has the best idea for the standard (or perhaps two-model) offering that should be provided to other people's children. It's yet another example of how Camoronism is about out-Labouring Labour.

What do the following have in common?

• The top 16 in the Eurovision Song Contest consist of 14 former communist-block countries, plus Greece and Turkey. As usual, regional block-voting dominated the outcome.
• Zimbabwe was elected to head the UN's Commission on Sustainable Development, thanks to the African block choosing to put African solidarity and contempt for the first-world ahead of responsibility.
• Every member of the EU except Britain defrauds the first phase of the EU Emissions Trading Scheme by overestimating their potential emissions and setting themselves targets that are so easy to meet that they can profit from excess emissions rights without having to make serious efforts to reduce emissions. The value of carbon in EU-ETS collapses as a consequence, and no significant reductions of emissions are attributable to the first phase.
• Concerted action on Darfur is undermined by the self-interest of countries like China, India and Malaysia.
• Concerted action on Iran's nuclear programme is undermined by Russian self-interest.
• Russia is trying to put together a gas cartel along the lines of OPEC, in order to control the price of gas to its mainly Western customers.
• Progress on reform of agricultural support and protectionism at the WTO is hampered by regional blocks trying to maximise their advantage. Rich countries like France are quite prepared to sabotage the process in order to protect the profits of the 3% of their population now engaged in farming. Their old, supposedly right-wing government has refused to countenance any reduction of support under the EU Common Agricultural Policy. Their new, supposedly right-wing president has called for Europe to be more protectionist.

There was some accidentally revealing stuff today on Radio 5Live's reporting of Tony Blair's resignation and their review of his premiership. First Jane Garvey reported that the halls of Corporation House were awash with empty champagne bottles the morning after the 1997 election. Realising that this gave the lie to the BBC's supposed impartiality, she whittered briefly on the subject of whether this really indicated preference for Labour, before eventually saying that she wished she'd never brought it up. Oops.

I attended a lunchtime talk today by Harriet Sergeant, who has written a booklet ("Handle with Care", published by the Centre for Young Policy Studies back in September), on the disgrace that is our care system for children who have to be removed from the parental home. The booklet can be ordered or downloaded from the CPS website, and I cannot recommend it highly enough. I hope Harriet will forgive me for quoting the first couple of paragraphs, as the best way to illustrate what an important and depressing story she has to tell:

"THIS YEAR approximately 6,000 young people will emerge from the care of the state. What is their future?

Of these 6,000, 4,500 of them will leave with no educational qualifications whatsoever. Within two years of leaving care 3,000 will be unemployed, 2,100 will be mothers or pregnant and 1,200 will be homeless. Out of the 6,000 just 60 will make it to university. Care is failing on a scale that is catastrophic.

It is not just a tragedy for the individual. A successful system of care would transform this country. At a stroke, it would empty a third of our prisons and shift half of all prisoners under the age of 25 out of the criminal justice system. It would halve the number of prostitutes, reduce by between a third and a half the number of homeless and remove 80% of Big Issue sellers from our street corners. Not only is our system failing the young people in care, it is failing society and perpetuating an underclass."

Clemency Burton-Hill (a multi-talented individual and real fox to boot, so I'm sorry to have to take the piss, but this is too good to ignore) reports in this week's Spectator that the Tories are "fighting back" against Gordon Brown's lead on international development issues "with a plan to send MPs into poverty-stricken Africa." I bet the poor Africans can barely contain their excitement.

It is a general rule that legislation often has the opposite effect to that intended, and that government action usually hurts most those that it is intended to help. We have a beautiful example reported in The Times today. One consequence of recent legislation to outlaw age-discrimination, is that Saga, provider of holidays tailored to the over-50s, is to be forced to open its holidays to all ages. If a group of 18-30-year-olds wish to book a Saga holiday and behave as they would on a Club 18-30 holiday, Saga are not allowed to prevent them.

What is the word for a story that reached the level of fiasco some time ago and continued to deteriorate? Fiasco seems inadequate as a decription of the failures of the NHS IT system, several of which have been noted on this site by JG.

Patricia Hewitt, interviewed on News 24 on Saturday morning, explained that she should not take responsibility for the MTAS fiasco because the new system had been widely consulted and widely supported prior to deployment. In other words, doctors liked the look of the system, and if they didn't tell her she'd got it wrong, whose fault was that?

Fascinating briefing by Peter Riddell in today's Times on the ideas of Oliver Letwin. Of course, Riddell is limited by the space constraints of newspaper reporting. On the one hand, he could have got by with a lot less space, if he had accurately and succinctly represented the essential vacuity of Letwin's "big idea". On the other, he could have filled the whole paper several times over if he had given a full exposition of the many layers of glossy pseudo-philosophising in which Letwin has wrapped the empty box of his intellectual bankruptcy.

Letwin's "big idea", Riddell reports, is that he wants to "shift the debate from an econo-centric paradigm to a socio-centric paradigm". In other words, we should forget about economics because capitalism has won the battle with socialism, and focus instead on "how we live".

So long as we live within the law, it is none of the government's business how we live. Perhaps he thinks the government is entitled to intervene in our lives because the way of life of a minority (the "underclass") affects everyone else's lives. But that is for two reasons - law and order, which the government should uphold without any need to venture more deeply into our lives, and costs of welfare provision. If it's the latter, we are back to economics.

If this is the "big idea", it is no more than a restatement of the old-fashioned Tory position in the classic divide - both sides want to interfere in our lives, but the Tories want to interfere in our personal lives, whereas Labour and the LibDems want to interfere in our economic lives. What about an option for government to interfere as little as possible in all aspects of our lives? 

More bitter experience. More unfinished business.

LP has pointed out The Guardian article in which Lord Falconer declares that Tony Blair has "big regrets" about not tackling the culture of public-service provision earlier. "I don't think we even really clocked that agenda until four or five years on", he is reported as saying.

This is looking like a theme. Why would the departing leader and his supporters be drawing attention to his failures? Has anyone got an alternative explanation to the one I posited yesterday?

Forget the legacy and the lecture circuit. Tony Blair has no intention of retiring from the front-line, nor even of being a good back-seat driver. He is preparing for the next phase of his political career, not for life after politics. How else are we to interpret his article in yesterday's Telegraph?

Mr Blair is positioning himself as the voice of wizened authority, of hardbitten realism, of painful lessons learned through bitter experience. Even the picture accompanying the article displays a harder-nosed Blair, staring out from the paper with a look of contempt that seems strangely familiar.

Anthony Blair	Alan B'Stard

The Telegraph interpreted Mr Blair's article as an admission that he "got it wrong on problem families". But that was merely a tasty morsel offered out to a right-wing journal. It was not the main message. The main message was that you need experience to understand the real causes and solutions to social problems, experience that Blair has and Cameron does not.

JG has been highlighting the MTAS fiasco. Besides the fine illustration it provides of this Government's incompetence and refusal to take responsibility for their mistakes, it also sheds an interesting sidelight on another bad Labour policy. On Thursday's Question Time, Caroline Flint, the Public Health Minister, explained the necessity to scrap the old system in the following words:

"I have heard, for example, from clinicians about how applications used to turn up at hospitals, they'd put them in a pile and literally pull them out at random. So it was all agreed that that system wasn't right."

A bad system is no reason or excuse to introduce something worse. And one of the main criticisms of MTAS is that it made the selection process more, not less random. But equally importantly, does this not describe almost exactly the "lottery" approach to assigning places in schools to students, introduced by egalitarian Labour councils and approved by this Labour government? Why is a random approach wrong for selecting junior doctors but right for selecting students?

But let's be fair and give credit where credit is due if a Minister manages to be sensible (a task made all the more compelling by the fact that Ms Flint is by a long chalk the hottest minister and probably the hottest MP in parliament, and that is not intended to damn with faint praise). Yesterday's Telegraph reports that Ms Flint has taken a robust and rational stance against the call from Alcohol Concern to make it illegal for parents to give their children alcohol. If parents can't teach their children how to drink responsibly, it is hard to know who should have that responsibility. And how would such a law have been enforced? Ms Flint is to be congratulated on resisting blinkered pressure groups, giving short shrift to such a nannyish idea, and choosing masterly inaction over ill-considered action.

Now if she could only teach the rest of her colleagues to apply the same approach, we might have fewer MTAS-style fiascos.

While I was away, I received a copy of this letter from Bob Durward (chairman of the classical liberal New Party) to David Milliband. Bob has allowed me to reproduce it here. I hope it tickles you as much as it tickles me.

To: Rt Hon David Milliband MP
Secretary of State, DEFRA
17 Smith Square
London SW1P 3JR

Dear Secretary of State,

My friend, who is in farming at the moment, received a cheque for £3,000 from the Rural Payments Agency for not rearing pigs. I now want to join the "not rearing pigs" business.

In your opinion, what is the best kind of farm not to rear pigs on, and which is the best breed of pigs not to rear? I want to be sure I approach this endeavour in keeping with all government policies, as dictated by the EU under the Common Agriculture Policy.

I would prefer not to rear bacon pigs, but if this is not the type you want not rearing, I will just as gladly not rear porkers. Are there any advantages in not rearing rare breeds such as Saddlebacks or Gloucester Old Spots, or are there too many people already not rearing these?

As I see it, the hardest part of this programme will be keeping an accurate record of how many pigs I haven't reared. Are there any Government or Local Authority courses on this?

My friend is very satisfied with this business. He has been rearing pigs for forty years or so, and the best he ever made on them was £1,422 in 1968. That is - until this year, when he received a cheque for not rearing any.

If I get £3,000 for not rearing 50 pigs, will I get £6,000 for not rearing 100?

I plan to operate on a small scale at first, holding myself down to about 4,000 pigs not raised, which will mean about £240,000 for the first year. Then I can afford to buy an aeroplane.

Another point: These pigs that I plan not to rear will not eat 2,000 tonnes of cereals. I understand that you also pay farmers for not growing crops. Will I qualify for payments for not growing cereals to not feed the pigs I didn't rear?

I am also considering the "not milking cows" business, so please send any information you have on that too. Please could you also include the Government information on set aside fields? Can this be done on an e-commerce basis with virtual fields?

In view of the above you will realise that I will be totally unemployed, and will qualify for unemployment benefits.

I shall of course vote for you at the next general election.

Yours faithfully,

Back from a fantastic week's skiing, and I find that we are being bombarded with comment spam, mostly from domains in Russia and Turkey. Having only enabled it a couple of weeks ago, I'm going to have turn off anonymous commenting, to get rid of these bastards. It's a piece of cake to register anyway, which is all you have to do to leave a comment. We don't need to know anything about you, we just need to know that you exist, so we can filter out the spammers.

I'm off skiing for a week, and JG has already headed off on holiday for a fortnight, so things may go a little quiet round here for a while. But LP should still be posting the summaries and maybe the odd additional posting if something catches her eye, so there should be something to keep things ticking over.

I had noticed that The Independent had ceased to be a newspaper and had become instead a soap-box from which Simon Kelner and his staff could bore on about Iraq and the environment. A sad decline from the refreshingly open-minded and wide-ranging paper of its launch. But I didn't know why.

The BBC is in many ways excellent (when you compare the quality of TV and radio in other countries, for example), but is nevertheless a persistent irritant with occasional outbreaks of festering sores. The priority given to football over everything else on Radio FiveLive is a long-term annoyance, as is the English bias of a supposedly British broadcaster (e.g. regularly giving preference to second-grade domestic English football games over Scottish, Welsh or Irish internationals of various sports). Their blatant and boring pursuit of a vendetta on Iraq is another persistent scab, particularly when their talking-up of opposition puts the lives of our troops in greater danger than need be, and drives the country towards more rather than less violence. Their liberal (in the American sense) bias, exposed by Robin Aitken and acknowledged by more independent-minded BBC journalists such as Jeff Randall, Andrew Marr and Jeremy Paxman, is perhaps the most egregious example of the problem that Hayek identified in The Intellectuals and Socialism.

My answer is that BBC1, Radios 1, 2, 3 and 5 and the various digital services should be privatised, leaving Radio 4, BBC2 and the World Service to produce high-quality programming that would not be provided by the market. All the talk of providing what the viewers want and giving them value for their licence-fee is hogwash. The market should provide what people want. If the government is going to tax us to provide something, it should only be for things we need but which will not be provided for by the market. It is quite clear from the various competing television and radio channels that the market can and does provide what BBC1, and Radios 1-3 & 5 offer - often better than they do. The BBC has to decide whether it is a commercial organisation pursuing ratings, in which case it should not be tax-funded, or a public service, in which case it should not pander to the lowest common denominator in the search for ratings. At the moment, they want to have their cake and eat it.

I admit this plan would not remove the bias, but it would dramatically reduce the amount we have to pay to support it. It would retain some of the pockets of individualism, such as can be found in the Newsnight team, to balance a reduced liberal majority. And it would expose most of those who are happy spoon-feeding the public with their sloppy metropolitan chatter to the reality of having to provide the public with what they actually want, rather than what the presenters want to give them.

The latest example of their unconscious bias was yesterday's reporting of the Budget debate on Radio FiveLive. Having suffered a recurrence of my chronic irritation, I was looking for fellow sufferers with whom to share sympathy, and came across a couple of excellent blogs that I have added to our blogroll. Biased BBC is the definitive site for recording examples of dripping-wet, state-funded reporting. Some Stuff is a newish blog with a wider interest than just the BBC or the media, but Ralph clearly shares my irritation with their partial reporting. I recommend them both to you.

Forget about what the BBC, the Government or the Tories say about the impact of the changes to personal taxation and benefits announced by Gordon Brown today. Here is what it really means for people of working age (comparing the current system with the system as it will be in 2009, according to Gordon's announcements, taking 2009 because many of the announcements are delayed or staged).

• Those earning between around £5,000 and £18,000 p.a. get to keep less of their wages than before.
• Those earning over £18,000 keep more of their wages, with the greatest benefit (proportionately) going to those being paid in the £40,000s.
• Couples with one principal wage-earner continue to pay more tax than two-income couples on the same combined household income, thanks to his rejection of any form of joint or transferrable allowance.
• The negative impact on low-earners is to be compensated mostly through increases in the threshold for withdrawal of Working Tax Credits (WTC) and, for those with children, increasing the level of Child Benefit for the first child and of the child element of the Child Tax Credit. Those with one or two children will be best-insulated by these measures from the effects of the changes to income tax. Those on low incomes with many or no children will be the worst hit.
• To avoid these increases dragging too many more people into the means-tested benefits bureaucracy, the withdrawal rate for WTC has been increased to 39%. Because losing benefits has the same impact as paying more tax on a household's net income, this has further increased the effective marginal rates of taxation on poorer households. In some cases, marginal rates of taxation are now approaching 100% - in other words, you barely keep a few pennies of every extra pound that you earn. Marginal rates of taxation determine the incentive for people to work harder, longer or smarter to earn more money, so increases in marginal rates act as a disincentive to work. Gordon announced this change as "further strengthening the incentives to work for families with children and low-income working households". The precise opposite is the case. The disingenuity of this claim marks Gordon as either a knave or a fool.

The BBC's reporting of the Budget debate on Radio Five Live has been fantastically lop-sided. On the most basic measure - air time - they broadcast the whole of Gordon Brown's speech but cut off both David Cameron and Ming Campbell mid-flow.

Instead of hearing their words, we were given John Pienaar's conclusions to save us the bother of making up our own minds. DC had been "outmaneouvred", he was "like a man who had had his legs cut off from under him", he was "floundering" and "drowning", unable to respond to the "magic" of Brown's cut in the basic rate of income tax to 20%.

To be fair, Cameron had missed the main point - that the cut to 20% had been largely paid for by the replacement of the starting rate (10%) with the basic rate, which Brown disingenuously announced as the abolition of the starting rate - sounding as though tax on income within the 10% band would now be zero, rather than the 20% that is actually intended. This is dangerously close to deceiving the house, but it did seem to have done the job in deceiving DC.

Ming Campbell (whose Treasury team, headed by Vince Cable, have a real understanding of economics, unlike the Tories) was not taken in, and, in his earnestly dull but intelligent way, nailed the point - that the changes to income-tax rates benefited middle-income earners but penalised low-income earners. We were not allowed to hear much more of his speech (in many ways a blessing, but hardly balanced) before the BBC cut back in and Pienaar told us that Campbell must have "mis-read" the announcement, that the effect was not to penalise the poor. This is what we need from the BBC - insightful analysis of the impacts of the budget. So why has Campbell got that wrong, then, John? Because Gordon "would not do that", apparently. What insight!

No wonder the big beast of the political jungle has survived so long, when the elephant guns of the media have been aimed largely at his predators. How strong is the beast really, if he needs that sort of protection?